How a customer paying with Square looks to a merchant. Image via Square.

By opening itself to Square, Starbucks is introducing everybody to paying by phone

ITworld|August 8, 2012

Two weeks ago, paying for coffee or cookies with your phone was a nerdy thing that people in San Francisco, Brooklyn, Austin, Tex., and Boston could do if they felt like it. As of last night, mobile payments just got really real, because now there’s a big green giant involved.

Starbucks is going to start accepting Square at 7,000 of its stores. Square is, basically, a credit card processor that offers generally smaller merchants two ways of taking payments: through a small, slotted credit card reader that plugs into a smartphone headphone jack, or through their own app. Starbucks didn’t desperately need a credit card processor, but through their investment in Square, they can possibly cut a better deal. The real value is in customers’ ability to order drinks through Square: they open a “tab” at a nearby Starbucks (or set Square to automatically open it when nearby), place their order, and say their name. The cashier looks at an iPad screen, sees their Square user picture next to their name, confirms it’s really them, and—that’s it.

What’s the big deal about people ordering mainstream-fancy coffee with fancy phones? As suggested in Jack Dorsey’s letter on Starbucks’ investment and partnership, when customers load up Square to open a Starbucks tab, they’ll see the other nearby businesses that accept Square. Suddenly, paying with your phone looks like something that you can do at a few different places, and you’ve had practice using it in the warm confines of your local coffee-with-other-stuff vendor.

On the flip side, Google Wallet just went nationwide in a different way. Wallet can now pay through any major credit card, and you can tap your phone anywhere MasterCard’s PayPass system is installed. That’s generally fast food and pharmacy chains, at least in smaller cities and towns. I loaded up my cards onto Google Wallet, went into a local Burger King where I knew there was a PayPass installation, and … the phone told me to ask the cashier if the tap went through, and the cashier was more than surprised I was trying to wave my phone at his credit card station. (I detailed the Wallet/fast-food conundrum in the last 10 minutes of episode 10 of In Beta, my podcast with Gina Trapani). I’ll try Wallet again, but even when it works perfectly, it’s mainly in use at places where you’re grabbing something quickly and trying to get out, and where credit cards are almost as fast.

Still, combining the SquareBucks announcement with the wider Wallet availability, and you can see a selection of folks making the jump not just to cashless buying, but cardless buying. The customer of the future is here, and their face is on your iPad.